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NAB SPECIAL INSIGHT REPORTTHE ‘EXPERIENCE ECONOMY’Which businesses are delivering in the eyes of consumers?May 2018NAB Behavioural & Industry EconomicsMore than ever businesses are focussing ondelivering a truly great customer experience. The keyquestion that arises is: can the quality of theexperience be measured? In this report we asked over2,000 Australians to tell us about their experienceswith a range of businesses - from traditionaldepartment stores to online stores, cinemas,restaurants, sporting events and concerts.HOW POSITIVE WERE OUR EXPERIENCES(net balance)78Restaurant77Movies/Cinema77Australian holiday71Overseas holiday59Festival - Food/Wine/Music/Comedy57Live Concert57Sporting Event - Domestic (e.g. AFL, Ruby League,)Highlights The digital age and growing threat of disruption haveelevated the importance of delivering a positivecustomer experience. Consumers are spending less on buying things andmore on doing things. Social media is supporting thischange as consumers share their lives online. Entertainment, food and leisure were among the firstto benefit from this shift in the economy. In the past year, 9 in 10 Australians have visited arestaurant, 8 in 10 have seen a movie, 7 in 10 havebeen on a local holiday, & 5 in 10 an overseas holiday,attended a sporting event, festival or live concert. The ‘experience’ provided by restaurants, cinemasholidays were rated by consumers most positively. Many other businesses, particularly retailers, havealso recognised the importance of providing a greatexperience for the customer. How did consumers perceive their experience withretailers? Interestingly, physical stores led the way,particularly discount department stores, majorsupermarket chains, discount chemists and discountsupermarket chains. But, there were also some ‘shopping’ formats thatscored less favourably - warehouse stores, traditionaltravel agents, sport stores, department stores andclothing stores. The highest rated online experiences went to onlinemarket places (e.g. Amazon, E-Bay). What did consumers most value from a physical retailstore? Overwhelmingly, ‘good value for money’,followed by convenient location, friendly andknowledgeable staff, lowest prices and variety. Other factors such as entertainment, store layout,bespoke products and personalisation were notvalued as highly. Only 5% would prefer to shop onlineand only 7% wanted an ‘omni-channel’ experience(i.e. an online as well as physical presence). This is not to say these factors are not valued, but it’sclear there are certain minimum expectations thatconsumers value from a shopping experience thatmust be met first.53Live Theatre (e.g. Play)53Live Musical50Sporting Event - International (e.g. Tennis, Cricket)TRAVEL &ENTERTAINMENT49Theme/Amusement Parks37Sporting Event - Participate (e.g. Triathlon, Swim)63Discount Department Store61Major Supermarket Chain60Discount Chemist58Discount Supermarket Chain57Online Market-Place54Electrical Store47Traditional Chemist42Online Travel AgentOnline Clothing Store39Online Grocery Store38Clothing Chain Store38Traditional Department Store3835Sports Chain Store31Traditional Travel AgentOnline Department Store31Online Chemist3131Warehouse StoreDate May 2018 Author NAB Behavioural & Industry Economics National Australia Bank Limited ABN 12 004 044 937 AFSL and Australian Credit Licence 230686RETAIL23Online Sports Store0204060801001

NAB Special Insight Report: The Experience Economy - Which businesses are delivering?May 2018WHAT IS THE EXPERIENCE ECONOMY?The term ‘experience economy’ first appeared in an article in the Harvard Business Review in 1998*. While othershad previously written on the topic, this paper went much further, predicting a new economic era post the agrarian(commodity based), industrial (goods based) and the service economy (service based).In this new experience economy, it was argued that businesses would have to create memorable events for theircustomers, and that memory itself would become a key part of the offering or the experience. In effect, thecommoditisation of goods and services would mean price and quality would no longer be the only differentiators consumers would also increasingly expect a unique purchasing experience.Today it’s clear that this prediction was quite visionary. Now more than ever, businesses are focussing on deliveringa truly great customer.The digital age and growing threat of disruption in many industries have been critical in elevating the importance ofdelivering the consumer a great experience. Through technology, consumers are much more educated and are ableto search, validate and communicate their preferences in real time. As a result, businesses have come to realise thatthe marketing promise of their product/service/brand must be fulfilled in the actual experience the customer faceswhen dealing with them - or risk losing them.Marketers talk of experiences being ‘sticky’ as they are emotional and long lasting. They can also be a strongdifferentiator as often it’s the overall experience that customers relate back to a brand. Of course, whilefundamentals such as price, features and delivery are still as important as ever, they can potentially be replicated bycompetitors. It’s much more difficult to copy an experience.There is also a growing body of research that suggests businesses that understand and truly deliver an experience,perform better (in areas such as sales, customer loyalty and brand advocacy) than traditional businesses or thosethat promise but don’t fully deliver.There are many ways to deliver a great customer experience. But to do so successfully requires a detailedunderstanding of customer needs and pain points. Only then can a business begin to match the promise to thedelivery.The key question that arises is: can the quality of the experience be measured? Research suggests that customers dorecognise customer experience quality and therefore are able to perceive the relative superiority or inferiority oftheir experiences.*Pine, B. Joseph II and Gilmore, James, “Welcome to the Experience Economy,” Harvard Business Review, July 1, 19982

NAB Special Insight Report: The Experience Economy - Which businesses are delivering?May 2018WHICH LEISURE & ENTERTAINMENT ACTIVITIES ARE MOST EXPERIENCED?In many wealthy countries, consumers are spending lesson buying things and more on doing things. As IKEA’sHead of Sustainability put it: “In the West, we haveprobably hit peak stuff.”*Social media is supporting this change as moreconsumers share their lives on Facebook, Instagram,Twitter, Snapchat etc. Moreover, posting pictures ofsomething we’ve bought is often deemed to be moredistasteful than posting pictures of something we’redoing.Some of the main beneficiaries of this behavioural shifthave been recreational service providers such as those inthe entertainment, food and leisure industries. Indeed,NAB’s own data on our customers’ spending patternssupports this shift, showing much faster growth insectors such as accommodation, food, arts andrecreation compared to other areas of consumption,including retail trade.Australians love of eating out, sport and otherentertainment is clearly on display here. Over the past12 months, around 9 in 10 Australians have visited arestaurant, 8 in 10 have seen a movie and 7 in 10 havebeen on a local holidayAround 1 in 2 have also enjoyed an overseas holiday,been to a local sporting event, a festival or live concert.And 2 in 5 have seen a live musical, visited atheme/amusement park or watched an internationalsporting event. Finally, for 3 in 10 Australians our love ofsport extends to active participation in a sporting eventsuch as a triathlon or swim.HAVE ATTENDED/EXPERIENCED IN THE PAST 12MONTHS - ALL (%)Restaurant90%Movies/Cinema78%Australian holiday70%Overseas holiday53%Sporting Event - Domestic (e.g. AFL, RubyLeague)47%Festival - Food/Wine/Music/Comedy46%Live Concert45%Live Musical42%Theme/Amusement Parks42%Live Theatre (e.g. Play)41%Sporting Event - International (e.g. Tennis,Cricket)39%Sporting Event - Participate (e.g. Triathlon,Swim)34%0%20%40%60%80%100%*Guardian Sustainable Business Event 2016HAVE ATTENDED/EXPERIENCED IN THE PAST 12MONTHS - GENDER (%)HAVE ATTENDED/EXPERIENCED IN THE PAST 12MONTHS - AGE e ConcertLive Musical40%50%Festival - Food/Wine/Music/Comedy28%49%Theme/Amusement ParksLive Concert34%Sporting Event - International (e.g. Tennis,Cricket)47%Live Theatre (e.g. Play)37%Men45%39%Live MusicalSporting Event - Participate (e.g. Triathlon,Swim)WomenTheme/Amusement ParksSporting Event - Participate (e.g. %40%45%Sporting Event - Domestic (e.g. AFL, RubyLeague)40%Sporting Event - International (e.g. Tennis,Cricket)47%Live Theatre (e.g. Play)36%Festival - Food/Wine/Music/Comedy73%75%Overseas holiday47%Sporting Event - Domestic (e.g. AFL, RubyLeague)84%88%66%Australian holiday65%60%Overseas holiday68%Movies/Cinema76%Australian holiday87%92%94%Restaurant60%80%100%0%20%40%60%50 30-4918-2980%100%Although a similar number of men and women have been to a restaurant or movies in the past year, surprisingly,more men have experienced all other activities than women. The biggest differences are apparent for domestic andinternational sporting events, participating in a sporting event, theme parks and festivals. The shift towards theexperience economy has been most supported by millennials and this is borne out in the survey results when splitby age. Across all activities, more young Australians participated in all activities and older people (over 50) the least.3

NAB Special Insight Report: The Experience Economy - Which businesses are delivering?May 2018HOW AUSTRALIANS RATE THEIR ‘EXPERIENCES’Businesses already dealing in experiences such as thosein entertainment, travel and food, are enhancing themto benefit from this shift in the economy.HOW POSITIVE WERE OUR EXPERIENCES IN THEPAST 12 MONTHS - OVERALL*In this section of the report, we ask consumers to ratetheir experience across a number of these categoriesincluding holidays, live theatre, sporting events an holiday77Overseas holidayIn net terms, more Australian consumers rated theexperiences they attended or participated in over thepast 12 months positively than did those who rated theirexperiences negatively. But, while all categories scoredpositively, some scored much better than others.Restaurants ( 78), movies and cinema ( 77), Australianholidays ( 77) and overseas holidays ( 71) were ratedpositively by the most Australians. Conversely,participating in a sporting event ( 37), theme andamusement parks ( 49) and international sportingevents ( 50) provided a positive experience for the leastnumber of Australians.71Festival - Food/Wine/Music/Comedy59Live Concert57Sporting Event - Domestic (e.g. AFL, RubyLeague)57Live Theatre (e.g. Play)53Live Musical53Sporting Event - International (e.g. Tennis,Cricket)50Theme/Amusement Parks49Sporting Event - Participate (e.g. Triathlon,Swim)370*NET BALANCE20406080By gender, more women rated their experiences positively than did men across nearly all categories, except fordomestic and international sporting events (where men were slightly more positive) and when it came toparticipating in a sporting event (even). The biggest differences between men and women were most visible when itcame to live musicals, live theatre and live concerts, which were rated positively by considerably more women thanmen.There were also some noticeable differences by age group. Over 50s rated their Australian holiday experiences thehighest overall (and well above young Australians). They also led the way when it came to restaurants, movies andcinema, and live theatre. However young and mid-aged Australians were much more positive than over 50s when itcame to participating in sporting events, theme and amusement parks, and live concerts.More mid-aged Australians also rated international sporting events higher than any other age group.HOW POSITIVE WERE OUR EXPERIENCES IN THEPAST 12 MONTHS - GENDER*73RestaurantAustralian holiday8373Australian holiday72Movies/Cinema8266Overseas holidayOverseas holiday77Sporting Event - Domestic (e.g. AFL, RubyLeague)545564Sporting Event - International (e.g. Tennis,Cricket)MenLive Musical5066Live Concert556540Live Musical2023Sporting Event - Participate (e.g. Triathlon,Swim)373704929Theme/Amusement Parks68Sporting Event - Participate (e.g. Triathlon,Swim)45Sporting Event - International (e.g. Tennis,Cricket)44406080100*NET 525961Live Theatre (e.g. Play)45Live Theatre (e.g. Play)48Festival - Food/Wine/Music/Comedy47Theme/Amusement Parks51Women52Live Concert67Sporting Event - Domestic (e.g. AFL, RubyLeague)59Festival - NET BALANCEHOW POSITIVE WERE OUR EXPERIENCES IN THEPAST 12 MONTHS - AGE*50 30-4918-2955575643434060801004

NAB Special Insight Report: The Experience Economy - Which businesses are delivering?Not only are we spending less money on buying things,and more on doing things, we’re also more likely toshare our experience online afterwards than if we wereto buy something.May 2018EXTENT WE SHARED OUR EXPERIENCES/EVENTS& PURCHASES OF THINGS ON SOCIAL MEDIA6.0When asked to rate the extent we share our experiencesor events on social media, Australian consumers scoredon average 3.7 points (where 10 is completely),significantly higher than sharing purchases of things onsocial media (2.8 points).0 not at all10 completely5.04.94.04.23.83.7Women and men were more likely to share theirexperiences online than purchases of things. But women(3.8 points) were a little more inclined to do so thanmen (3.6 points). Men (3.0 points) were however morelikely to share their purchases of things online thanwomen (2.6 points).By age, 1